Medical Debt Settlement


Medical Debt Settlement: A Guide for Managing Medical Bills

Medical debt is a growing crisis in America, with over 100 million adults carrying past-due medical bills. For many, the costs are simply too high to pay off entirely. This leaves medical debt settlement as an option to resolve balances at a fraction of the amount owed.Settling medical debt can be complex, but also presents a path to financial freedom when done right. This guide covers everything you need to know about the medical debt settlement process.

How Medical Debt Settlement Works

With medical debt settlement, you negotiate directly with creditors and debt collectors to pay a percentage of your total balance. This releases you from the legal obligation to pay the remainder. On average, settlements resolve medical debts for 30-50% of the amount owed.The process involves:

  • Reviewing medical bills and identifying debts for settlement
  • Contacting creditors and making settlement offers
  • Signing a settlement agreement once an offer is accepted
  • Making lump-sum payments or payment plans to satisfy settlements

Settlements can cover hospital bills, doctor visits, lab tests, ambulance fees – any outstanding medical debt being pursued by collectors. The key is that these accounts are with the original provider or are in collections. Debt that has progressed to a lawsuit requires legal assistance.Settlements provide a relatively fast and inexpensive path to eliminate medical debt compared to bankruptcy. The trade-off is settling medical bills can hurt your credit score. However, recent changes limit the impact to 7 years and exclude paid and under-$500 accounts.

Settling Medical Debt Yourself

You don’t necessarily need a lawyer to settle medical debt. With some persistence and negotiation skills, you can contact creditors yourself to make settlement offers.The process involves:

  • Review medical bills – Gather all outstanding medical debts and identify accounts to target for settlement. Prioritize debts in collections.
  • Determine settlement eligibility – Creditors will only settle if you have a legitimate inability to pay. Be prepared to share details on income, expenses and hardship.
  • Make initial settlement offers – Aim for 30-50% of the balance as a starting offer. Offer lump-sum or multi-month payment plans.
  • Provide documentation – Creditors will request proof of financial hardship. Provide income statements, bank statements and expense reports.
  • Negotiate – Be prepared to negotiate, potentially making multiple revised offers before reaching a settlement.
  • Get settlement terms in writing – Always get a written settlement agreement with details on settlement amount and payment timeline.
  • Make payments as agreed – Follow through on settlement terms to secure debt forgiveness. Seek renegotiation if you default on payments.

With persistence and preparation, you can settle medical debt yourself directly with creditors. However, the process is time consuming and emotionally draining. Many opt to hire professional assistance.

Using Medical Debt Settlement Companies

Medical debt settlement companies provide experienced negotiators to secure settlements on your behalf. These services come at a cost but greatly simplify the process.Settlement companies typically charge 15-25% of enrolled debt as a fee, collected only if a settlement is reached. There are also monthly service fees. Costs vary based on settlement amounts and company.The process with a settlement company involves:

  • Enrolling accounts – Provide details on all eligible medical debts to enroll in the program.
  • Stop paying creditors – You must stop making payments directly to creditors once enrolled.
  • Set up dedicated account – Settlement companies have you set up a dedicated bank account to deposit funds that will pay settlements.
  • Wait for settlements – It takes time for the company to negotiate settlements. Most occur within 12-24 months.
  • Approve and make settlement payments – You must approve each settlement offer before agreeing to payment terms.
  • Finish program – Keep enrolling new debt until all accounts are settled. Old debts fall off your report 7 years after settlement.

Settlement companies greatly reduce the legwork of negotiating medical debt relief. However, fees cut into savings and the process still takes time. Thoroughly research companies, read reviews and compare costs before enrolling.

Pros and Cons of Medical Debt Settlement

Settling medical debt provides a relatively quick path to eliminate balances but also comes with drawbacks. Consider these key pros and cons:Pros

  • Settle debt for a fraction of the amount owed (typically 30-50%)
  • Avoid bankruptcy court and legal fees
  • Resolve debt in months instead of years
  • Available for both individual and family medical debt


  • Settled accounts appear as negative marks on your credit report for 7 years
  • Late fees and interest may still accrue while settling
  • Potential for scams – vet settlement companies thoroughly
  • Lump-sum settlements can be difficult to afford

For those facing severe financial hardship, the pros often outweigh the cons. Just be sure to negotiate credit report goodwill removal whenever possible.

Alternatives to Medical Debt Settlement

Settlement provides one option for managing unaffordable medical bills. But it is not necessarily the best approach for everyone. Alternatives to consider include:

  • Payment plans – If affordable, pay off debt through monthly payment plans with creditors.
  • Medical credit cards – Transfer balances to 0% APR medical credit cards to avoid interest.
  • Debt consolidation loans – Combine medical debts into a lower interest consolidation loan.
  • Credit counseling – Non-profit credit counseling provides advice and debt management plans.
  • Financial assistance – Hospitals provide charity care and payment assistance for low-income patients.
  • Crowdfunding – Turn to friends, family or crowdfunding to raise money to pay off medical debt.

The best approach depends on your specific circumstances. Evaluate all options to find the most strategic method to tackle your medical debt.

Steps to Rebuild Credit After Medical Debt Settlement

Since settled accounts stay on your credit report for 7 years, you’ll need to take action to rebuild your credit over this period. Steps to take include:

  • Pay all current debts on time going forward
  • Lower credit utilization by paying down balances
  • Become an authorized user on someone else’s account
  • Only apply for new credit when absolutely needed
  • Request credit limit increases on existing accounts
  • Wait for settled items to fall off your report
  • Dispute settled accounts once paid – request deletion for “paid as agreed”

With time and diligent credit management, you can fully recover from the credit impacts of medical debt settlement.

Finding Support for Medical Debt Relief

You don’t have to tackle overwhelming medical bills alone. Support is available, including:

  • Non-profit credit counseling – Get advice on managing medical debt from accredited non-profit credit counseling agencies.
  • Legal aid – If you qualify based on income, legal aid provides free legal help, including with debt issues.
  • Financial assistance – Look into charity care, Medicaid, hospital payment plans and medical bill advocacy for aid.
  • Debt support groups – Join a medical debt support group to get encouragement and advice from others in similar circumstances.
  • Therapy – Seek professional help to cope with the anxiety and depression that often accompanies financial problems.

You have options for resolving unaffordable medical debt. The key is finding the right approach for your unique situation. With persistence and support, you can overcome medical debt.

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